Introduction

There are several grounds on which removal from the SDN OFAC sanctions list may be pursued. Each of these grounds requires demonstrating a change in circumstances and eliminating original causes, inaccuracies, or errors on the part of OFAC.

Change in Conduct and Elimination of Original Causes

One of the most effective grounds for removal from the OFAC Specially Designated Nationals (SDN) List is the elimination of the factors that originally led to the designation. This basis applies equally to individuals and legal entities, provided they can demonstrate that the relevant circumstances have fundamentally changed.

For example, if an individual was included on a sanctions list because he held a leadership position at a defense enterprise, then documentary evidence that he no longer holds that position would serve as proof. In the case of a company, if it was listed, for example, due to supplying dual-use goods, evidence may be provided to show that such supplies are no longer being made.

Additionally, the overall situation would appear much more favorable if the company had implemented new compliance procedures that enable clear monitoring and control over the compliance of supplied products with U.S. sanctions requirements.

The key point is that such changes must be substantial and verifiable from OFAC’s perspective. In addition to the mentioned compliance procedures, such evidence could include, for example, the results of an internal audit and certain organizational changes.

Organizational Changes

Organizational changes, naturally, apply to companies. Changes such as a shift in shareholders or management or a restructuring of the enterprise are important indicators of a company changing course after being included on the OFAC SDN sanctions list. However, it should be noted that these changes must be substantial from OFAC’s point of view. Simple formal reshuffling or cosmetic adjustments will not suffice.

For example, if a company was added to the OFAC SDN list because its majority shareholder was previously sanctioned, replacing that shareholder—i.e., selling their stake in the company to a non-sanctioned individual or entity—would constitute a significant change, potentially allowing the company to petition OFAC for removal from the SDN list.

Another possible change is a shift in management, particularly if any of the company’s executives were sanctioned in their personal capacity, or if replacing the majority shareholder alone is not enough to radically change the company’s image. In such cases, replacing certain managers whose reputations contributed to the company’s inclusion on the OFAC sanctions list may also be necessary.

A more extensive restructuring is also possible, involving not only changes in shareholders and management, but also in specific divisions and/or business activities. This could reflect a more fundamental transformation of the company’s profile and the direction of some of its operations.

Court Decision

If an individual or legal entity can prove their innocence in court or provide credible evidence of being wrongfully designated on the SDN OFAC List, this can serve as valid grounds for removing sanctions.

However, it should be noted that decisions made by foreign courts generally do not carry decisive weight when it comes to OFAC’s decision on removing an entity from the U.S. sanctions list. At the same time, submitting substantial evidence confirmed by a foreign court will undoubtedly be considered during the case review and will most likely play a positive role.

In addition to court decisions and other legal proceedings outcomes, a person or entity included on the OFAC SDN list may also submit the results of audit inspections and other documents that can serve as evidence of compliance with U.S. sanctions and other U.S. laws.

Cooperation with OFAC and Participation in Sanctions Compliance

It may happen that after submitting a request for removal from the OFAC SDN list, during the course of discussions with OFAC, it becomes apparent that you or your organization can assist OFAC in clarifying a matter of importance to them or otherwise contribute to the enforcement of the U.S. sanctions regime. In such cases, OFAC may be inclined to respond favorably and consider the provided assistance when deciding on removal from the SDN OFAC list.

For example, you could present evidence that identified deficiencies have been corrected and commit to preventing them in the future, assist OFAC in the investigation of another sanctions case, or take other actions that help strengthen the enforcement and oversight of the sanctions regime.

Evidence of Erroneous Designation on the SDN OFAC List

However, the most compelling argument for removal from the OFAC SDN list is, without a doubt, proof that your inclusion was either a mistake or lacked sufficient grounds. For example, you may have been added to the U.S. sanctions list as the CEO of a metallurgical holding, but you had resigned from that position several weeks prior to being listed, and you can provide documentary evidence to confirm this.

Other examples include a company’s activities being fundamentally misinterpreted or an individual being incorrectly identified as its ultimate beneficial owner (UBO). In our practice, there have been cases where a company was sanctioned under the so-called “50 Percent Rule”, or was directly added to the SDN OFAC list simply because its UBO had already been listed. In some instances, the sanctioned UBO had already divested his share in the company before it came under sanctions. In such cases, the company can file a petition with OFAC for removal from the SDN OFAC list, arguing that at the time of designation, the sanctioned individual no longer exercised control over the company and was neither its beneficiary nor a manager.

Conclusion

Being added to the SDN OFAC list is by no means a “one-way ticket.” OFAC frequently emphasizes that it not only designates individuals and entities but is willing “…to remove persons from the SDN list consistent with the law.” Moreover, according to OFAC itself, “the ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior”.

Thus, in many cases, just as there is a path to being added to the SDN list, there is also a path to being removed from it. Of course, this requires sufficient grounds and the proper presentation of materials and arguments in accordance with U.S. law.

Contact us, and we will help you assess your situation properly and, if there is a valid basis, challenge your or your company’s inclusion in the SDN OFAC list.